Information Acquisition, Decision Making, and Implementation in Organizations
53 Pages Posted: 22 Mar 2016 Last revised: 22 Aug 2019
Date Written: August 5, 2019
We study a decision process of a two-agent organization that consists of a decision-maker who selects a project and an implementer who implements and executes the selected project. Each of the decision-maker and the implementer has intrinsic and possibly divergent preferences over projects. Key features of the model are that (i) there is the separation of decision and implementation, and the performance of the selected project depends on the implementer's costly effort; and (ii) the implementer engages in both acquiring additional information and implementing the project. We show that the implementer's incentives to gather information and to implement the selected project interact with each other in a non-trivial way. We in particular show how this interaction affects the optimality of diversity of preferences in organizations as well as the implementer's strategic communication.
Keywords: Decision Process, Preference Heterogeneity, Information Acquisition, Communication, Biased Agent, Complementarities
JEL Classification: D23, D82, D83, M11
Suggested Citation: Suggested Citation